Research Seminar in Economics - Andrea Ariu, University of Munich, "Migration, Better Products and Trade: Evidence from the Swiss-EU Agreement on the Free Movement of Persons"

This paper uses the gradual opening of the Swiss labor market to European citizens as a natural experiment to show that immigration attenuates information frictions and leads to better products, more trade and to a more efficient organization of global value chains. Exploiting the exogenous geographical and temporal variation in the implementation of the agreement, I find that Swiss localities exposed to the immigration shock increased the quality of inputs coming from the foreign workers' home countries suppliers. Better intermediates affected positively the quality of output making Swiss products more appealing for international markets and increasing exports by 5.5%. Therefore, foreign workers improved the upstream structure of Swiss global value chains by using their knowledge and experience to open the host market to higher quality inputs coming from their home countries; this increased the quality of the exported products and made them more intensively used downstream.